Reality Hits You Hard, Bro

Let’s get the title reference out of the way, click here for the YouTube where an Arizona resident reminds us that, sometimes, reality hits you hard, bro.

The realities that hit you hard in this matter are convoluted but not complex.

Reality Hits You Hard, Bro!

Aggressive Council Moves

The City of Glendale City Council voted 5-2 to negate an existing contract with the Coyotes at a contentious June 10, 2015 special City Council meeting which had been scheduled one day earlier.

Reasonable people recognize scheduling a voting meeting and giving your business partner one day’s notice to prepare as an extremely aggressive move, especially given one of the two councilmembers supporting the Coyotes was out of town.

Also of note is that the two parties had one brief, reportedly very confrontational on the city’s part, private meeting to discuss issues with the current agreement prior to the City Council meeting.

The arena management agreement was renegotiated between the Coyotes and Glendale. The two business partners surely assumed they were negotiating in good faith with each other. The city held three closed door executive session meetings to discuss the arena management negotiations.

The resulting new agreement was accepted unanimously at a special July 13, 2015 City Council meeting. Page nine of the amendment has a clause awarding Glendale the right to cancel the management agreement “any time after June 30, 2016”. Revenue from concessions, sponsorships, and licensing “directly attributable to hockey events” would still go to the Coyotes (IceArizona, actually).

That clause, and the two year term, was a red flag to people familiar with the history of the Coyotes in Glendale.

The Other Shoe Drops

Less than two months later, with a unanimous vote on September 8, Glendale re-hired Beacon Sports Capital to start a request for proposals (RFP) process for a new arena manager.

Less than two months, a short enough time that would lead a reasonable human to believe the intention was, all along, to oust the Coyotes as managers of the city owned arena despite what then interim city manager Dick Bowers said in July:

“The Coyotes have no intention of participating in the Glendale RFP (request for proposal),” Coyotes president, CEO and co-owner Anthony LeBlanc said Wednesday in a terse and brief response.

Why not participate? Because the city blindsided their business partner. Again.

AEG Gets The Contract, Surprising Zero People

AEG was awarded the arena management contract, beating out the current management company. Click here for our analysis of that deal.

The NET expense to the city is slightly MORE than it was with the Coyotes. Yes, MORE.

Because AEG is a world class management company VERY familiar with hockey and what it means to run an arena, the similarity of the net expense to the city to the existing contract clearly indicates the existing contract with the Coyotes was reasonable and prudent.

Ironically, the five year agreement with AEG is essentially contingent on the Coyotes NHL hockey team remaining in the building, playing their regular season games at Gila River Arena. If they leave, or if there is a significant change in revenue from things such as naming rights, AEG retained the right to renegotiate the deal and leave if they couldn’t come to terms with Glendale.

AEG management isn’t stupid, they realize that 41 regular season games played in an arena would have a significant impact on their bottom line and, consequently, on the bottom line of the shops, restaurants, and bars in Westgate.

No Discussions With AEG or City

An AZ Central article from Paul Giblin today detailed letters sent from Glendale officials to Phoenix officials regarding the entry of Phoenix into competition for the Coyotes as an anchor tenant. The past several months have been rife with rumors and facts about the Coyotes investigating the possibility of working together with another partner on a new arena.

Now, apparently, the economics of the Coyotes leaving is finally beginning to sink into the minds of Glendale council members and staff.

Glendale mayor Jerry Weiers penned a letter (click here) to Phoenix Mayor Greg Stanton, imploring Stanton to essentially see the big REGIONAL picture and consider backing off the Phoenix pursuit of an agreement with the Coyotes.

Stanton burns Jerry down pretty clearly in his reply letter, using his own quotes in published articles to emphasize he fully supported Glendale reaching a long term agreement with the Coyotes.

Giblin’s piece covers the letters completely, but there’s a few lines in the letter from Weiers scolding Stanton that stand out:

“… for the record, there is a strong desire by the City of Glendale and our fellow West Valley cities to keep the Coyotes here in Glendale for many years to come.”

“… AEG has already been in substantive discussions with the Coyotes organization to secure a multi-year lease extension and are optimistic that this agreement can be completed in the very near future.”

When Coyotes CEO Anthony LeBlanc was contacted by Giblin:

“What? Wow. I’m flabbergasted,” LeBlanc said. “Let me be emphatic: There are not discussions ongoing, nor have there been, for the Coyotes to stay in Glendale long term. There’s absolutely none.”

That statement is crystal clear. While it may be true that NOW there will be a push to extend the contract with the team, it’s also true that yet another snipe from city officials isn’t the way to repair burning bridges.

City Says The Coyotes Suck

Both the letter from the fourth or fifth (it’s hard to count, do we count “acting” managers?) Glendale City Manager in a few years, Kevin Phelps to his counterpart in Phoenix and from the mayor lay out the shortcomings they see in the Coyotes:

“… the Coyotes success is about increasing the overall regional fan and corporate support provided to the Coyotes.”

Weiers goes further, repeating a line from the Phelps letter but adding his own brand of snark:

“While residing in the 11th largest metropolitan market of the 30 NHL teams, fan support ranks a very dismal 29th. Corresponding corporate support and local television revenues are also near the bottom.”

Dismal.

Neither man, of course, would acknowledge the uncertainty injected into the Coyotes existence by the city.

Uncertainty is Expensive

Glendale’s new business partner, AEG, understands the financial impact of uncertainty. AEG included a very strong out clause for their contract if the Coyotes leave. They INSISTED on the certainty of having 41+ events every year generating revenue.

Normal people understand savvy businesses would be reluctant to sign a long term contract with the Coyotes if they only have a two year deal with the city.

As to quality of play on the ice, even a casual observer can understand the potential reluctance of players to sign contracts with a team that has never been able to reach a long term agreement with their host city. If there’s a possibility of the team moving in a year or two, why subject yourself and your family to upheaval when other teams have the solid support of the city they serve?

LeBlanc agrees, this from the Giblin piece:

“I find it amusing that the mayor of Glendale, who has no experience whatsoever, has decided to opine on what he thinks the financial viability of the franchise is. At the end of the day, the biggest issue this franchise has faced in the last number of years has been uncertainty,” LeBlanc said.

When he says “amusing”, LeBlanc probably (insert disclaimer of our opinion ONLY here) means “not amusing at all, but not unexpected given the source”.

Why Now, Jerry?

Why would Glendale go public with letters scolding their counterparts in Phoenix?

Money.

Let’s add this up

The cocksure attitude of the “new look” Glendale City Council that was so apparent after the June, 2015 meeting may be crumbling a bit. It’s election season, and the economic realities of a city owned arena without an anchor tenant should make great political fodder against Hugh and Weiers.

It’s not a stretch to imagine AEG has tempered the expectations of the city regarding the viability of their arena without a professional sports team as an anchor tenant.

It was widely reported that some city officials were relying on filling the building with an AHL team or something similar. Perhaps it was AEG, rather than twenty minutes of simple research, that convinced them AHL teams don’t grow on trees and, even if they did, the number of tickets sold would be a “dismal” 3,000 or so per game.

Perhaps the merchants or the manager of Westgate finally convinced them that losing 500,000+ visitors per year would be a bad thing.

Perhaps the parks department pointed to the cool new playground that would still be a threadbare set of monkey bars and a couple swings littered with crack vials if the Coyotes didn’t jump in and fix it.

The Good News

The Coyotes appear to be making significant progress in resolving this nagging issue that ruins the appetites of Coyotes fans and players and front office staff every summer.

The apparent panic of Glendale officials means positive information is floating around in the political ether that regular people like us don’t have access to.

NO ARENA SEASON NEXT YEAR! Plus the Coyotes have a bunch of solid young players AND a couple first round picks, plus Shane Doan is aboard, plus there will be an AHL team in Tucson, plus youth hockey is exploding in Arizona…

Dismal? Not so much, Jerry.

STOP THE PRESSES

Two minutes after we hit the “publish” button on this blog post, a letter from Anthony LeBlanc showed up, click here for the letter, click here for the KTAR post.